Alternative assets

Investments in private equity are illiquid. They are funds which long-term investors entrust to specialists, who use them to purchase private companies that are not listed on the stock market with the aim of selling them on to third-parties or a view to listing them on open markets in the future.


Private equity investors embarking on a long-term investment programme, generally over five to twelve years. In the past, the returns obtained from this type of investment have been high owing to the significant added-value achieved through their sale to third-parties or when they are listed at a later date.

These returns have attracted large numbers of investors, and make up for the lack of liquidity.

Hedge funds are investment funds that are managed in a specific manner. The funds entrusted to the manager are invested in all types of assets making more or less intensive use of leverage, options, forward currency transactions and short sales.

Leverage (borrowing additional capital in return for fund assets as collateral) allows the manager, when it is done judiciously, to significantly boost the profitability of the fund assets. Options and forward currency transactions allow the manager to use leverage to play the upside or the downside of the markets. They commit only a small part of the funds under management.

Short sales allow the manager to sell borrowed assets. The manager then purchases the assets back in order to pay them back to the lender. The manager will hope to do so at a price that is lower than that for which he originally sold them. This is a bearish approach.

Since the beginning of the 1990s hedge funds have enjoyed great success, as they strive to achieve absolutes returns that do not depend on market trends and offer limited liquidity of three to twelve months. They use complex pricing models and are not very transparent.

Investments in real estate are most often made using collective investment instruments, namely real estate investment funds.

These funds invest the assets entrusted to them in high-yield real estate investments, real estate management companies or even mortgages.

They fall into the real material asset category and offer good protection against inflation, as well as returns from rental income and interest on loans.

There is a regular market for shares in real estate investment funds and they therefore offer a good level of liquidity.